Permalink Submitted by Alan - IRA critic on Sat, 2021-12-18 16:34
Starting in 2022, you should be sure not to complete your RMD before you do all your QCDs. For example, if your RMD is 50k and you plan 10k of QCDs, be sure to complete the QCDs before your total distributions equal 40k. To make this simpler, it is often recommended to simply complete all QCDs before you distribute any RMD amount to yourself.
For example, if you completed 50k of distributions before your QCDs were complete, then additional QCDs would not offset the RMD taxable income. For example, if you did a 5k QCD first, then took out the remainder of the RMD of 45k, your RMD would be completed, but you still have another 5k of QCDs to make. In this situation, the 5k QCD done after the RMD was completed would not be taxable, but neither would it reduce the taxable amount of your RMDs below the 45k. Your taxable income would be 45k instead of the 40k desired.
Permalink Submitted by gautam SHAH on Sat, 2021-12-18 17:03
THANK YOU FOR DETAIL EXPLANATION. I think QCD max limit is 100k completing it first before taking RMD how do you tell brokerage account this is QCD? Also does QCD has to be deposited in recepients account prior to taking RMD?
Permalink Submitted by Alan - IRA critic on Sat, 2021-12-18 17:37
You contact the IRA custodian and tell them you would like a QCD check and the name of the charity. The brokerage will usually mail you the check for delivery to the charity. You should ask for the usual written receipt from the charity, same as if it was a regular donation. The QCDs are included on your 1099R with the rest of your RMD just like any other distribution, and you would indicate “QCD” next to line 4b on your return. The QCD check does not have to be cashed by the charity before you take the rest of your RMD, but the check should be given to the charity with plenty of time for them to cash the check before the end of the year.
Permalink Submitted by Alan - IRA critic on Mon, 2022-01-17 20:50
If you do a QCD between the day you reach 70.5 and 1/1 of the year you reach 72, there is no current year tax impact but your IRA balance for determining future RMDs will be reduced, thereby slightly reducing future RMDs. In these years before RMDs, if you want to reduce your tax bill and can itemize donations, you are better off to donate from your taxable accounts rather than doing QCDs.
Permalink Submitted by Alan - IRA critic on Sat, 2021-12-18 16:34
Starting in 2022, you should be sure not to complete your RMD before you do all your QCDs. For example, if your RMD is 50k and you plan 10k of QCDs, be sure to complete the QCDs before your total distributions equal 40k. To make this simpler, it is often recommended to simply complete all QCDs before you distribute any RMD amount to yourself.
For example, if you completed 50k of distributions before your QCDs were complete, then additional QCDs would not offset the RMD taxable income. For example, if you did a 5k QCD first, then took out the remainder of the RMD of 45k, your RMD would be completed, but you still have another 5k of QCDs to make. In this situation, the 5k QCD done after the RMD was completed would not be taxable, but neither would it reduce the taxable amount of your RMDs below the 45k. Your taxable income would be 45k instead of the 40k desired.
Permalink Submitted by gautam SHAH on Sat, 2021-12-18 17:03
THANK YOU FOR DETAIL EXPLANATION. I think QCD max limit is 100k completing it first before taking RMD how do you tell brokerage account this is QCD? Also does QCD has to be deposited in recepients account prior to taking RMD?
Permalink Submitted by Alan - IRA critic on Sat, 2021-12-18 17:37
You contact the IRA custodian and tell them you would like a QCD check and the name of the charity. The brokerage will usually mail you the check for delivery to the charity. You should ask for the usual written receipt from the charity, same as if it was a regular donation. The QCDs are included on your 1099R with the rest of your RMD just like any other distribution, and you would indicate “QCD” next to line 4b on your return. The QCD check does not have to be cashed by the charity before you take the rest of your RMD, but the check should be given to the charity with plenty of time for them to cash the check before the end of the year.
Permalink Submitted by Brian Devers on Mon, 2022-01-17 20:28
I understand always doing a QCD when RMDs are required.What factors should one consider in doing a QCD before RMDs ?
Permalink Submitted by Alan - IRA critic on Mon, 2022-01-17 20:50
If you do a QCD between the day you reach 70.5 and 1/1 of the year you reach 72, there is no current year tax impact but your IRA balance for determining future RMDs will be reduced, thereby slightly reducing future RMDs. In these years before RMDs, if you want to reduce your tax bill and can itemize donations, you are better off to donate from your taxable accounts rather than doing QCDs.